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China Takes No. 1 Spot From U.S. -- Good for Us

The U.S. is no longer the biggest oil importer in the world.

For decades, we've been hearing about U.S. dependence on foreign oil. Whether it's our dependence on "people who don't like us," a problem with sending money overseas, or the fact that our economy is dependent on an energy resource we don't control, you couldn't get away from the beating drum over foreign oil. Recently, the narrative has taken some interesting turns, and now it may be another country that's troublingly dependent on foreign oil.

China overtakes the U.S ... again You may not have noticed, but over the past eight years our dependence on foreign oil has declined rapidly. In 2005, we imported 60.3% of the oil we used. By 2009 that number was down to 51.5%, and in January of this year we imported just 37.3% of the oil we consumed. That's astounding in and of itself, but it's even crazier when you consider that the second largest economy in the world, China, has been quickly moving in the opposite direction. It has now taken over the role of the biggest oil importer, a title we'd held since the mid-'70s.

In December, for the first time, China imported more oil than the United States. The country, built on exports, imported 6.12 million barrels per day, or 60% of consumption, to 5.98 million in the U.S. -- a shocking turn of the tables. You can see that the general trend for U.S. imports has been declining since 2005 while China's production and consumption gap has been widening:

This is more than just an indication of our energy futures. It's an indication of our geopolitical futures as well. China must now play nice with those supplying vast amounts of oil or risk economic disruption.

Political implications Depending on oil from places like the Middle East, where we have so many political problems, has been a challenge for decades. But with imports falling and abundant supplies from our biggest supplier, Canada, the U.S. is well on its way to eliminating dependence on anyone outside North America for oil. China is in a different position.

In 2011, Saudi Arabia (20%), Iran (11%), Russia (8%), and Venezuela (5%) were four of the country's largest oil suppliers, and a new pipeline to Russia will expand its flow to China. Each has its own political challenges, and with China becoming dependent on foreign oil, it forces the country into the middle of conflict.

China would love to have less dependence on these countries for oil, but it doesn't have the same production capacity as the U.S. or the expertise to unlock the oil it does have.

Turning to the U.S. for helpChina hasn't experienced the same boom in production as the U.S. and is years away from making a significant dent in either oil or gas production by using fracking. Currently, it's being forced to depend on others to bring needed technology. China's CNOOC(NYSE:CEO) has purchased stakes in Chesapeake Energy(NYSE:CHK) in the U.S. and built a relationship in China to gain fracking experience. China Petrochemical tapped ExxonMobil(NYSE:XOM) to partner on shale projects, providing expertise as the largest natural gas producer in the United States.

Chevron (NYSE:CVX) and Royal Dutch Shell(NYSE:RDS-A) have already begun drilling in what are expected to be gas-rich regions of China, but the progress is slow. Chevron drilled one well last year and has plans for three more. Shell has drilled nearly 30 wells with partner China National Petroleum and plans to spend $2 billion in China this year, but management doesn't even expect to know the size of the opportunity until the middle of this decade. Let's also not forget that most of this development is focusing on China's abundant natural gas resources. That may expand to oil, as it has in the U.S., but there's no guarantee China has the same oil reserves as we have found in the past few years.

In tapping multinational companies, China is giving up some of the control it craves in energy and other parts of the economy. China doesn't normally let outside companies bid on oil projects, so partnerships are a clear sign that China needs help developing its own shale.

To add to the challenge, China has to deal with the environmental impact of fracking. The country has long had water shortages in many energy-rich areas, and fracking is a water intensive endeavor. Then there's the potential impact of chemicals used in fracking, which has been hotly contested in the United States.

A paradigm shift has begun For all of the problems the U.S. has faced in the past decade, we've done a remarkably good job reducing imports of oil by increasing production and slowing demand growth. An ocean away, the thirst for growth and an expanding middle class have sent China in the opposite direction.

China's new dependence on foreign oil will have far more impact than just adding to imports. The geopolitical and economic impact could be devastating at a time when China is just becoming established as a major world force.